How do organizations behave as complex systems ?
Auteur : Rihab ABBA
When asked about their top risk concerns, most company managers name complexity, globalization, cyber security, IoT, social media and business model disruption (https://news.mit.edu/2016/mit-forum-infosys-risk-group-release-risk-survey-findings-0606). Funnily enough (if you’re open to dark humor), the risk concerns listed next to complexity are themselves sources of complexity, because of the high number of agents involved and the dense interactions at play. Complexity is therefore one of the biggest challenges facing organizations, and massive resources are being mobilized to understand it as well as identify its sources and accelerating factors.
For this purpose, several insights are unexpectedly being shared with organizations from other scientific fields, such as biology, meteorology, physics and computational science. These various disciplines have started analyzing complexity as early as the 80s, each in their respective area of research, and came up with similar results as to how complex systems behave. Thanks to this accumulated knowledge, organizational complexity, which became a science on its own in the years 2000, benefited from a big shortcut. It was fascinating to discover that, as complex adaptive systems, human groups (populations, organizations, markets, the Internet…) functioned in the same way as an immune system, a beehive, an ecosystem, a brain, weather turbulences or a cell. Because of their complexity, all these systems shared the same set of behaviors. Here are the behaviors identified in several science fields and recognized within organizations as well:
1- The first behavior of organizations is connectivity, which relates to the ability of the complex system to dynamically build new connections between its agents and with its environment. The higher the connectivity, the higher the complexity. However, for this building dynamic to be sustained, the connections created need to be easy to break and replace. For example, companies using a siloed structure and fixed work groups generate poor connectivity compared to companies with an open structure and flexible project teams. On the other hand, connectivity is enhanced in companies that include their external stakeholders (bankers, customers, suppliers…) in their decision-making process, training sessions, events partnering, etc.
2- The second behavior of organizations as complex systems is to foster autonomous agents. Each component of the company (employees, departments, projects) enjoy a certain level of autonomy, but under a set of core rules that apply equally to all agents. The higher the number of internal laws, the stricter the organization, the lower the autonomy and the lower the flexibility in crisis times. On the other hand, the lower the number of internal rules, the closer to a chaotic system.
3- The third behavior of complex systems, also applicable to organizations, is emergence, or synergy effect. This is one of the most important positive aspects of complexity, because it allows for value creation without additional resources. Thanks to the agents interaction, value is added in an unpredictable fashion, but without randomness, because the causality chain can be traced back, a posteriori. The emergent properties are not inherent to the agents themselves, and follow a pattern that can be observed and described. For example, a project team gets innovative and adapts to a challenging environment, but the team members, taken individually, are not highly creative or adaptable.
4- The fourth complexity systems’ behavior is non equilibrium. It’s is related to the system as a whole, and is characterized by instability and difficulty to go back to equilibrium after a disruptive event. Stock exchange markets illustrate perfectly this behavior, as well as all business environments with high volatility.
5- The fifth behavior observed in all complex systems, organizations included, is non-linearity, due to the high uncertainty level of interactions outcomes. The input generates spontaneously, self-amplifies and self-accelerates, making it near impossible to forecast the output. This behavior is closely scrutinized by experts, especially because of the self-amplification of insignificant inputs that could, over time, cause extreme disruption (think butterfly effect). This phenomenon, called “drift into failure”, goes through certain phases, until it reaches its tipping point. It’s up to market observers to recognize the red flags early enough to take action and avoid stock market bubbles and crashes.
6- The sixth behavior, self-organization, is a major asset of complex systems. Disruption from its external environment induces an autonomous change in the way the system behaves and structures itself. The disruptive event is considered as a threat to be avoided (resilience), or at least adapted to, by reducing, if not eliminating its impact. The Covid sanitary crisis has shown the importance of self-organization in companies:
when successful, the organization reaches a new state of equilibrium. If it fails, two scenarios are plausible: either the company’s performance lowers, due to the staking of minute incremental changes (which eventually leads to a drift into failure), or the company learns from the experience, fosters creative solutions thanks to its collective intelligence, and manages to improve its performance.
7- The last behavior, co-evolution, goes beyond what happens within the system itself, to observe how it impacts and is impacted by the other systems in its environment. Adapting to and changing the environment is an irreversible process, as can be illustrated by the digitalization transformation. It started with customers, gaming and technology actors, followed by e-commerce, then banks had to adapt their services, and ultimately governments gave up resistance and digitalized their services as well.
Understanding the behaviours of the organization as a Complex System is crucial if the managers wish to minimize its drawbacks and maximize its potential benefits. Managing complexity starts with awareness and objectivity, without falling into the catastrophe mindset: even if complexity is often associated with its negative aspects (non-equilibrium, non-linearity), these are easily outweighed by the value-added and resilience-building of more positive characteristics of complexity, be it self-organization, co-evolution or emergence which, when optimized, lead to a better performance of the whole organization.